This working paper is being revised frequently as new
data are collected and as its methodology is fine-tuned. Please check back often
for updated versions. — Ryan Olson

When local school districts contract for ancillary
services, the districts usually report significant
savings. Those savings enable districts to direct more funds to classrooms
or toward any programs or staff the district deems important. According to the
Mackinac Center’s most recent survey,
40 percent of Michigan districts have contracted at least one of the three
major support services: food, janitorial and transportation.

If the remaining districts were to contract with private
vendors, Michigan schools could save at least $200 million and as much as $500
million. This quarter billion to half billion dollars in savings could be
realized if school districts were required to seek competitive bids for the
three major support services.

Under current arrangements, school boards considering
competitive contracting often face incredible
public pressure and opposition orchestrated by school employees unions. If
districts were required to seek bids, they may find that their current service
personnel would offer the highest quality for the best price. However, they
would also be able to compare their current arrangements with service providers
in the private sector, which are usually known for their quality, safety and
efficiency.

The estimate of as much as $500 million is based on the
average per-pupil savings realized by school districts that reported they had
contracted for support services and provided savings figures during the Mackinac
Center’s
survey research. In a few instances, district savings were supplied by
media reports. The average per-pupil savings figure for each service was
then multiplied by the total state aid membership of those districts that had
not yet contracted for the service.

State aid membership — 25 percent of the previous year’s
full-time-equivalent-student count and 75 percent of the current year’s count —
is used because
most state funding is based on this pupil "count." Furthermore, because
enrollment is declining statewide, state aid membership is slightly larger than
actual full-time-equivalent pupils, thus making the savings estimates more
cautious than they might otherwise be.

Note that savings reports were not available from all
districts that had privately contracted for services, including some who said
they had saved money. Thus, 18 districts reported that they had tracked savings
for janitorial services and could reproduce the annual figure for that
particular service, while 13 did so for food services and only three did so for
transportation services. Savings figures from districts that had contracted for
more than one service and reported only one aggregate figure were not used to
ensure that the estimate is not overstated.

The averages were multiplied by the state aid membership of
only those districts that have not yet contracted for services. Some of those
districts had previously contracted for services that they later brought
back "in house," but it is quite reasonable to assume that reissuing
requests for proposals and seeking new contracting arrangements would
provide such districts the opportunity to establish a good contract and save
funds. Alternatively, being required to reopen the bidding process would at
least reveal the market price for support services and encourage local
bargaining units to align themselves with that likely more realistic cost
assessment.

The $500 million total is comprised of approximately $20
million from contracting for food services in those districts that have not yet
contracted, about $180 million from janitorial services and about $300 million
from transportation services.

Using the average savings for contracting food services —
about $20 per pupil — likely yields a low estimate because eight of the 13
districts whose reported savings are used have contracted only for the
management of their food service. Districts that contract for
both management and labor in their food service departments would likely
report larger per-pupil savings. This means that the result of contracting both
aspects of food services would probably yield much more in savings than this
estimate indicates.

The average per-pupil savings from transportation, about
$220 per pupil, seems to be a reliable figure because per-pupil savings are
fairly consistent in the three districts that have tracked and reported savings,
despite the fact that their enrollment sizes and area in square miles vary
significantly.

Were districts required by the state to
bid out for support services, the savings for the first year may be as low as
$200 million, if current collective bargaining agreements cannot be opened. Some
legal experts think that a district cannot open agreements because they have
already consented to the contract arrangements for a defined period of time.
Other experts think that current agreements’ expiration dates are irrelevant
because state law makes support services a prohibited issue in contract
negotiations.

These
legal questions were discussed in the Mackinac Center’s recent primer on
school contracting. The $200 million figure is calculated by taking a third of
the maximum savings and rounding up. The one-third figure is relevant here
because collective bargaining agreements typically expire after a three-year
period. However, when given the chance in court proceedings to make the argument
for keeping collective bargaining agreements closed to the consideration of
private contracting, the MEA has backed away
each time. Their reticence may indicate that the MEA’s own counsel has
determined that current collective bargaining agreements are not a constraint to
contracting with a vendor for support services.

Below is a table listing each district whose per-pupil
savings report was used. Similar savings would likely be achieved — to the tune
of $500 million — in the remaining Michigan local school districts if they were
required to bid out the three major support services.

Food Service Contracting in
Districts That Tracked and Reported Savings†

School District Name

State Aid Membership

Annual Savings

Per-Pupil Savings

PINCONNING AREA SCHOOLS

1,774.91

$ 10,000.00

$5.63

NILES
COMMUNITY SCHOOL DISTRICT

4,045.86

$150,000.00

$37.07

ALBION
PUBLIC SCHOOLS

1,431.98

$ 30,000.00

$20.95

ST.
LOUIS PUBLIC SCHOOLS

1,249.98

$ 25,000.00

$20.00

LANSING PUBLIC SCHOOL DISTRICT

15,534.00

$562,500.00‡

$36.21

NORTHWEST SCHOOL DISTRICT

3,390.86

$ 40,000.00

$11.80

LAKESHORE PUBLIC SCHOOLS

3,351.86

$ 25,000.00

$7.46

OAK
PARK CITY SCHOOL DISTRICT

4,113.40

$200,000.00

$48.62

ANN
ARBOR PUBLIC SCHOOLS

16,731.91

$400,000.00

$23.91

LINCOLN CONSOLIDATED
SCHOOL DISTRICT

5,006.86

$130,000.00

$25.96

DEARBORN HEIGHTS
SCHOOL DISTRICT #7

2,903.29

$ 30,000.00

$10.33

ROMULUS COMMUNITY SCHOOLS

4,306.15

$ 20,000.00

$4.64

WOODHAVEN PUBLIC SCHOOLS

5,293.42

$ 80,000.00

$15.11

AVERAGE

$20.59

Janitorial Service Contracting in
Districts That Tracked and Reported Savings†

School District Name

State Aid Membership

Annual Savings

Per-Pupil Savings

SUPERIOR CENTRAL SCHOOL DISTRICT

391.00

$50,000.00

$127.88

BRANDYWINE COMMUNITY
SCHOOL DISTRICT

1,469.58

$150,000.00

$102.07

COLDWATER COMMUNITY SCHOOLS

3,178.01

$372,000.00

$117.05

ALBION
PUBLIC SCHOOLS

1,431.98

$250,000.00

$174.58

HARRISON COMMUNITY SCHOOLS

1,864.87

$434,000.00‡

$232.72

LITTLEFIELD PUBLIC SCHOOL DISTRICT

358.58

$50,000.00

$139.44

NAPOLEON COMMUNITY SCHOOLS

1,656.06

$305,000.00

$184.17

JACKSON PUBLIC SCHOOLS

6,638.19

$1,200,000.00‡

$180.77

CEDAR
SPRINGS PUBLIC SCHOOLS

3,484.63

$191,000.00

$54.81

HARTLAND CONSOLIDATED SCHOOLS

5,613.09

$1,000,000.00

$178.15

GWINN
AREA COMMUNITY SCHOOLS

1,437.42

$175,000.00

$121.75

ATLANTA COMMUNITY SCHOOLS

425.20

$60,000.00

$141.11

REETHS-PUFFER
SCHOOLS

4,181.27

$480,000.00‡

$114.80

FREMONT PUBLIC SCHOOL DISTRICT

2,508.80

$300,000.00

$119.58

AVONDALE SCHOOL DISTRICT

3,880.13

$490,000.00‡

$126.28

HOLLY
AREA SCHOOL DISTRICT

4,184.12

$625,000.00

$149.37

DURAND
AREA SCHOOLS

1,861.25

$85,000.00

$45.67

GARDEN
CITY SCHOOL DISTRICT

5,428.33

$733,333.33‡

$135.09

AVERAGE

$135.85

Transportation Service Contracting
in Districts That Tracked and Reported Savings†